27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Tesla Inc (NASDAQ:TSLA) projects positive net income and free cash flow in the third quarter. While most on the Street regard the goal with disbelief, Bernstein is more open-minded.
The Rating
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Bernstein analyst Toni Sacconaghi Jr. maintained a Market Perform rating on Tesla with a $265 price target.
The Thesis
The analyst considers Tesla’s targeted achievement “unlikely” this year — but doesn’t rule it out entirely.
“If Tesla can deliver on all components of its guidance, then we see a possibility that it can generate positive net income in the 2H,” Sacconaghi Jr. said. “But the assumptions are significant.”
Tesla would have to deliver on ambitious gross margin, operating expense and working capital goals, each of which are seen to face headwinds.
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To start, Sacconaghi Jr. said less-than-expected fixed cost leverage could limit Model 3 gross margin improvements, although he conceded that high average selling prices could help.
At the same time, Tesla may have difficulty cutting operating expenses — a “critical variable" — without compromising customer service or growth. Factoring in synergies from the SolarCity segment, Sacconaghi Jr. models for 16-percent opex growth, a rate he said is “aggressive.”
Finally, by the analyst's assessment, Tesla's working capital can improve and materially drive FCF in the second half but would prove a one-time boost. The metric is expected to hurt FCF in the long run as international deliveries and increasing stock keeping units drive inventory days.
Price Action
Tesla shares were up 4.43 percent at $289.07 mid-morning Monday.
Related Links:
Vertical Group's Gordon Johnson Figures Tesla Lost $14K Per Model 3 In Q1
Musk Says He Ignored Analyst Questions Because They 'Represent A Short-Seller Thesis, Not Investors'
Photo courtesy of Tesla.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.